In short, Italian banks are loaded with bad debts, as Legorano notes that 17% of bank loans in Italy are "sour," a level much greater even than that of the US banking system at the height of the financial crisis (5%).

The percent of Italy's nonperforming loans outstanding has roughly tripled since the financial crisis. Andy Kiersz / Business Insider

Also at issue is that Italy's banking system, as Legorano writes, tends to "focus on plain-vanilla lending activities" — things like holding deposits and lending to businesses and homeowners as opposed to the more lucrative investment banking, trading, or asset management.

This leaves Italy's banking system particularly sensitive to the record-low interest-rate environment as safer banking activities will more closely hug the benchmark interest rates set by policymakers. In Europe, interest rates are negative.

Problems within Italy's banking sector could also cause a political headache for Prime Minister Matteo Renzi, who faces a referendum vote on reform measures in October. Renzi has promised to quit if he loses the vote, Bloomberg notes.

Of course, issues surrounding the Italian banking system are not strictly new, and in the past year shares of UniCredit — Italy's only bank considered globally significant — and Banco Monte dei Paschi di Siena, the oldest bank in the world, are down over 60%.

Bloomberg

Reports surfaced in April that the government could step in to shore up the banking system; days later the government got executives, insurers, and investors to put 5 billion euros into a rescue fund for Italy's weakest banks. On Tuesday morning, a report from Bloomberg said Italy was looking to inject up to 3 billion euros into Monte dei Paschi; this would be the bank's third bailout since the financial crisis.

Deutsche Bank wrote in a note to clients in May that Italy posed the biggest risk to markets even though the market at that time was looking past issues in Italy as referendum on the UK's membership in the European Union loomed. And over the weekend, analysts at Citi also took this view, writing:

"Outside of the UK, the next major political event may be a referendum in Italy on Senate reform, as PM Renzi's political future may be tied to the outcome of the referendum. It raises the risk of Renzi-exit at a time when the upstart 5-Star Movement are riding high in the polls and with Italy having among the highest levels of Eurosceptic sentiment."

Markets have been unsettled since the June 23 vote for a British exit from the EU, or Brexit, but the reaction has not been as dramatic (save for the first 24 hours) as some might have predicted.

But as we have moved past the initial shock and the early stages of digesting how the Brexit could affect markets in Europe and around the world, it seems that markets in Italy have found their first knock-on impact to worry about.